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The road to resilience - managing and financing extreme weather risks

Description

The frequency, severity and exposure of energy systems to extreme weather events are increasing and affecting the energy system. While in the past impact-resistant – ‘fail-safe’ – structures were built, today’s system complexity and increased incidence of extreme weather require a shift towards having energy infrastructures operating under a ‘safe-fail’ approach. The solution appears to be ‘smarter not stronger’. Taking a systemic approach to identify technical risk naturally enables the development of innovative financing for the energy sector.

Protecting energy infrastructure assets from extreme weather will add significantly to the estimated US$48–$53trn in cumulative global investment needed in energy infrastructure by 2035. It is clear that governments alone cannot cover the costs of ensuring secure and reliable energy systems that meet our current and future energy demand and at the same time are able to withstand the impact of extreme weather events. Private investors must join in the funding.

Adaptation measures often lack regulatory guidance regarding what is necessary to increase resilience. There is currently no agreed goal or metric for adaptation, or specific responses to extreme weather. Nor is there agreement on how much resilience is sufficient and how increased resilience can be related to an additional revenue stream and so become attractive for investors. Government and regulators should implement regulatory frameworks to clearly define the levels of resilience required for energy infrastructure. This could enable the finance sector to create suitable financial vehicles which would help the private sector to carry their responsibility in resilience. The report provides further understanding on this complex issue that affect energy systems due to climate change.

Reference information

Source:
World Energy website

Published in Climate-ADAPT May 14 2018   -   Last Modified in Climate-ADAPT Jun 23 2021

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